HSBC's latest release of the Indonesia Manufacturing PMI did not paint a positive picture as Indonesia's manufacturing activity was reported to have contracted sharply in August 2013. The index declined to a 15-month low amid a contraction of output, new orders and export business. Payroll numbers fell at the fastest rate in the history of the HSBC survey. The August index stood at 48.5, down from 50.7 in July 2013, and marks the fourth consecutive month of decline. A reading below 50.0 indicates a contraction in manufacturing activity.
Weak domestic and global demand in combination with an overall deterioration in Indonesia's manufacturing sector were the main drivers of the decline. The HSBC report mentioned that "new export business contracted for the third month running in August, whereas the decline in total new orders was the first recorded since May 2012. Order book volumes fell solidly and at a rate that was the strongest since April 2011. Indonesian manufacturers suggested that both foreign and domestic demand was weaker."
Employment in the country's manufacturing sector weakened in August for the first time in five months. "Some companies commented that voluntary leavers had not been replaced, while a few indicated that workforce numbers were reduced in tandem with lower order book volumes," according to the report.
ASEAN Economist at HSBC Su Sian Lim commented on the report: “Weaker demand both domestically and externally appeared to be behind the worsening in manufacturing conditions in August. This is the fourth straight month of deterioration in the PMI, and marks the lowest print since May 2012. The rise in inflation - as reflected by higher input and output prices - will likely continue to curb domestic demand in the near-term. External demand, meanwhile, will likely only improve gradually, as suggested by China's PMI reading of just above 50.0 for the same month.”
Click here to read the summary of the HSBC Indonesia Manufacturing PMI™